The Employer's Guide Blog for Overseeing PBMs

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PBM Service Fees: The One Topic Which Rarely Comes Up During Contract Negotiations

For 5 minutes, I contemplated the word I’d use in this post to describe my feelings about the lack of meaningful engagement self-funded employers, and their advisers, have when it comes to proactively managing pharmacy benefits.

Sure everyone complains about the lack of transparency, ambiguous contract languange, spread pricing and other opaque PBM practices, but what are you doing different today than you were ten years ago, really? The word I chose is fascinated.

I’m fascinated because it’s an opportunity to help solve a problem. Please, please, please if you’ve never considered the PBM service fee in how you procure pharmacy benefit management services watch the 5-minute video below.

How can so many smart and educated people never require a PBM to disclose its service fee? Let’s be clear the service fee is not the same as the admin fee nor is it the final plan pharmacy cost. Hidden in the final plan cost is the PBM service fee. Why aren’t these smart people pulling this number out? One possible answer is that decision-makers lack a meaningful level of engagement.

Too many purchasers (plan sponsors and their advisers) are simply looking for the PBM vendor who puts the lowest price on paper or makes their life less complicated. This leads to being mired in the status quo not exceptionalness. Best price involves several variables including but not limited to admin fees, rebate guarantees and AWP discounts. The problem is not knowing the truth or consequences behind those numbers.

Your cross-functional PBM selection committee could be comprised of the brightest minds in legal and finance, but if they’ve little or marginal knowledge around PBM revenue mechanisms they’ll be taken for a ride. Trust me on this one I see it on a daily basis.

Back to the point about engagement. How engaged are you around pharmacy benefits? I’ll assume if you’re involved at any level with the procurement or management of pharmacy benefits your response is, “I’m fully engaged” or something similar.

However, what if I posed the question a different way and instead asked, “what are the four drivers of pharmacy costs?” Are you still as confident in your level of engagement? More importantly, could you manage those drivers to maximum cost-effectiveness? My contention is that a fully engaged person can answer that question without hesitation.

The National Pharmaceutical Council (NPC) recently published a worksheet which enables employers to first gauge their approximate position on a segmentation grid of consulting quality and pharmacy benefit engagement, and then identify actions to improve the overall quality of consulting support received and/or organizational engagement.

I strongly encourage you to complete the NPC worksheet and based upon the questions posed in this post to be brutally honest with your level of engagement. Asking tough questions and taking action is how problems get solved. Don’t do The GM Nod.

Tyrone Squires, MBA, CPBS

I am the proud founder and managing director of TransparentRx, a fiduciary-model PBM based in Las Vegas, Nevada. We help health plan sponsors reduce pharmacy spend, by as much as 50%, without cutting benefits or shifting costs to employees.

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